Dalal Street Week Ahead: Trump, FII mood, Rupee, NTPC Green IPO among 10 key things to watch next week

Equity Market Trend

The markets  maintained their southward journey and closed the truncated week ending November 14 about 2.5 percent down. With this, the benchmark indices have corrected around 10 percent from the record highs of September 27. In fact, the indices were down in six of the last seven weeks.

Weak Q2FY25 results along with a likely cut in the full year earnings estimates, and sustained FII outflows dented sentiments. Also, CPI inflation spiking to 6.2 percent (RBI's target is 4 percent), a rising Dollar index and bond yields, and uncertainty over further rate cuts by the Fed contributed to continued volatility.

Experts expect consolidation with a negative bias to continue in the coming truncated week too as they believe that premium valuation without fair earnings growth will not be sustained. Market participants may remain cautious with a focus on developments following Donald Trump's election, the FII mood, movement of the Rupee against the Dollar, and US bond yields.

The BSE Sensex declined 2.4 percent to reach 77,580, and the Nifty 50 dropped 2.55 percent to close at 23,533; comparatively, the correction was severe in the broader markets. The Nifty Midcap 100 and Smallcap 100 indices were down 4.1 and 4.6 percent, respectively. And all sectors, barring IT, were under pressure.

"Consolidation may continue in the near term; however, beaten-down value stocks may witness bottom-fishing due to their potential outlook," said Vinod Nair, Head, Research, Geojit Financial Services.

Going ahead, he said, the focus will be on the implications of Trump's election for  emerging markets.

The markets will remain shut on November 20 for Maharashtra assembly elections.

Here are the 10 key factors to watch next week:

Domestic economic data

Market participants will  closely watch the November HSBC manufacturing and services flash PMI numbers due on November 22. In October, the manufacturing PMI expanded to 57.5 from 56.5 in September, and the services PMI jumped to 58.5 from 57.7 during the same period.

Forex reserves for the week ending November 15 will also be released on November 22.

Global economic data

Further, on November 22, the world will have its eyes on the manufacturing and services flash PMI data from developed and emerging countries, including the United States, the Euro zone, Japan, and the United Kingdom.

Apart from the PMI numbers, the weekly US jobs data, the ECB's (European Central Bank's) financial stability review of the Euro zone, as well as the October inflation print for Europe, Japan, and UK will be keenly watched.

Developments in the Trump administration

Investors are keeping an eye on the developments in the administration of US President-elect Donald Trump, including his cabinet formation. According to experts, any policy proposals that add upward pressure on US inflation may impact the Fed's future rate-cut trajectory. Federal Reserve Chair Jerome Powell has already signalled that after a 75 basis point (bps) cut, further cuts may not be aggressive and will be data dependent. At 2.6 percent, US inflation for October was higher than the 2.4 percent in September.

The Dollar index, the Rupee, and FII flows

Market participants will also focus on the movement in the US dollar index, bond yields, performance of the Rupee  against the Dollar, as well as FII flows. Amid softening rate cut expectations and speculation about tax cuts and hike in trade tariffs under Trump, the Dollar index jumped last week. In fact, it has consistently been rising since October, up more than 6 percent from the first week of October to finish at 106.67 last Friday.

Ten-year US treasury yields climbed near the highs of January 2024, closing the week at 4.44 percent against 4.3 percent last week. Overall, the yields have been northbound since mid-September, when it was 3.62 percent. The US bond market is concerned about the likely increase in fiscal deficit under the Trump government as he has promised cuts in corporate taxes.

Rising bond yields — along with worries over premium valuations and earnings downgrades — caused relentless FII selling in India, but DIIs managed to offset the outflow to a considerable extent, providing support to the market. FIIs net sold stock worth nearly Rs 9,700 crore last week  (Rs 29,533 crore in the current month), in addition to the Rs 1.14 lakh crore outflow the previous month. On the other hand, DIIs net bought Rs 12,508 crore worth of shares during the week, taking net purchases  for the current month to Rs 26,522 crore, on top of Rs 1.07 lakh crore last month.

The Rupee hit an all-time low of 84.46 against the Dollar last week, finishing at 84.4 on Friday as demand for the Dollar remained high given the fear of rising US inflation under  Trump, which can slow down the Fed's rate cut cycle. Experts expect the Rupee's weakness to persist in the short term.

Oil prices

Muted oil prices are supporting  the equity markets, as India is a major oil importer. Brent crude futures, the international benchmark for oil prices, fell 3.83 percent during the week to close at $71.04 a barrel. In fact, oil has largely remained below $80 a barrel since September.

The easing of US storm threats, reports that Hezbollah might consider a US-Israeli ceasefire proposal, and oversupply concerns raised by the OPEC, the IEA, and the EIA have pulled oil prices down.

IPO

Despite negative sentiment in the equity market, four companies will open their initial public offerings in the coming week. In the mainboard segment, NTPC Green Energy's Rs 10,000-crore initial share sale will hit Dalal Street on November 19, with a price band of Rs 102-108 per share. Enviro Infra Engineers will launch their IPO  on November 22, while Zinka Logistics Solutions will close its Rs 1,115-crore public issue on November 18  and debut on the bourses on November 22.

There will also be  action  in the SME segment with the Rs 61.2 crore Lamosaic India IPO  opening on November 21 at a price of 200 per share, while subscription for C2C Advanced Systems' Rs 99-crore public issue will start on November 22. The latter has a price band of Rs 214-226 per share. Furthermore, Neelam Linens and Garments India will debut on the bourses on November 18, while trading in Mangal Compusolution and Onyx Biotec shares may commence on November 21 and 22, respectively.

Technical view

Technically, Nifty 50 is looking weak given the long bearish candlestick pattern on the weekly charts with lower highs and lower lows. Also, it is trading way below its 10-20-week EMAs (exponential moving average) and a tad below its 200-day EMA (DEMA). If the index fails to come back above the 200-DEMA, it may start approaching its 50-week EMA (23,224), which somewhat coincides with the second target of the Head and Shoulders pattern formed on the daily charts, followed by 23,000, according to experts.

The momentum indicators, too, remained in the negative terrain. After severe selling pressure, the index may rebound somewhat to the 23,700-23,800 zone, but that is unlikely to sustain given that the Nifty is  trading below all its key moving averages. Experts advised  a `sell-on-rally' strategy considering the bearish sentiment.

F&O cues

Options data indicated that 23,500 is expected to be the immediate support for the Nifty followed by 23,000, while  23,600 is likely to be the immediate hurdle, followed by 24,000.

According to the weekly options data, the maximum Call open interest was seen at 23,600 strike, followed by the 24,200 and 24,000 strikes, with maximum Call writing at  23,600 strike, and then 23,500 and 23,700 strikes. On the Put side, the 23,500 strike holds the maximum open interest, followed by 23,000 and 23,400 strikes, with maximum writing at 23,500 strike, followed by 23,400 and 23,100 strikes.

India VIX

Volatility increased a bit after a sharp decline in the previous week, and remained in the higher zones. Hence, the bulls need to be cautious until  volatility drops to around 12-13 and stays there. India VIX, the fear indicator, rose 2.11 percent during the week, to 14.78.

Corporate action

Here are key corporate actions taking place next week:

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